Differences between Forex and Stocks

Forex and stock markets differ from the number of trading alternatives available. The forex market is very limited unlike in the stock market where it involves thousands of alternatives. Most of the traders engage on the seven varieties of currency pairs. The four “major” currency pairs includes EUR/USD, USD/JPY, GBP/USD, USD/CHF, while the three commodity pairs comprise of USD/CAD, AUD/USD, NZD/USD.

Furthermore, a few pairs that are combined of the same currencies are called “cross currencies”. In turn, currency trading is less complicated to follow instead of randomly picking the best pair over 10,000 stocks available. Forex traders only need to practice is to “keep up” on these eight countries economic and political market news and events.

The stock market, on the other hand, usually settle at lull, which appears to have a shrink on volumes including activity. Therefore, it is quite difficult to either open or close positions when you prefer to. Moreover, generating profit in a declining market is relatively challenging unless a trader is extremely clever or lucky enough. It is quite impossible to short-sell in the U.S. stock market as they have a very strict rules and regulations.

However, in the forex market, a bigger opportunity to generate profit from both rising and declining markets is possible, as at the same time for a single trade, you are buying and selling, plus, short-selling is part of the trade. Moreover, as the forex market is so liquid, traders don’t necessarily have to wait for an uptick before they are able to enter into a short position as it is the stock market rule.

The forex market involves high liquidity that’s why margins are set to lower and leverage is higher. Low margin rates in the stock market are rarely offered.

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